Vascon Engineers Ltd. reported significant overall revenue growth, primarily driven by their EPC (Engineering, Procurement, and Construction) segment. Despite challenges such as an extended election period and adverse weather conditions, the company achieved an impressive 35% year-on-year revenue growth in Q1 FY25. This growth demonstrates the company’s ability to maintain momentum and execute projects effectively in challenging circumstances.
Robust EPC Outlook with Strong Order Book and Government Support
The EPC segment’s outlook remains robust, supported by a strong order book of 3,482 crores, which is 4.9 times the FY24 EPC revenue. This substantial order book provides a strong foundation for future growth and execution. Of the total revenue from order book, 979 crores are attributed to external EPC orders, while 53 crores are for internal projects. Notably, 82% of these orders are from government projects, which is expected to support steady cash flow and ensure fast execution timelines. The company has also received a new order from PWD for the construction of a college worth 331.82 crores.
Real Estate Segment Prospects
The real estate segment shows promising prospects for Vascon Engineers. Most of their projects were completed in fiscal year 2023, and the company plans to launch two new projects in the current fiscal year, with revenue contributions expected in future quarters. In Q1 FY25, the company achieved new sales bookings totaling 12,24 square feet, generating a sales value of 7 crores and a total collection of 11 crores. The company is also forming relationships with A-grade top realtors in Pune, Mumbai, and Coimbatore to establish a consistent stream of new property and project launches over the next year.
GMP Business Performance showing 22% yoy growth
The GMP (Glazing and Metal Products) business continues to show improved performance. In Q1 FY25, this segment generated revenue of 79 crores, representing a 22% year-on-year growth. The GMP business also maintained a healthy gross margin of 26%. The EBITDA for this segment was 4 crores with a 6% EBITDA margin in Q1 FY25. These figures indicate that the GMP business is contributing positively to Vascon Engineers’ overall financial performance and diversifying its revenue streams.
Financial Challenges
The company faced financial challenges due to accounting treatments under IndAS, leading to timing differences in booking expenses and revenue in the real estate business. This caused a decline in profit before tax and tax compared to the previous quarter, highlighting the complexity of financial reporting in real estate and the impact of accounting standards on profitability.
Strategic Outlook and Growth Initiatives VEL is optimistic about its future, supported by a strong balance sheet and increased bank guarantee limits. The company plans to expand its real estate segment by partnering with realtors in key markets. With a diverse business model, robust EPC order book, and real estate expansion plans, VEL is well-positioned for sustained growth across all segments in the coming years.